Benefits of Chapter 13 Bankruptcy

Chapter 7 bankruptcies are known as liquidation bankruptcies and are seen as good by some because they result in the fairly quick discharge of a person’s debt. Chapter 13 bankruptcies are referred to as “wager earner’s” bankruptcy and allow debtors to restructure his or her debt and repay all or part of it in installments.

How does a Chapter 13 bankruptcy work?

In a Chapter 13 bankruptcy, a person’s debts are all consolidated and repayments are made through the bankruptcy court to creditors. These payments are made monthly out of the creditor’s disposable income and can be spread out for periods of between three and five years.

How long will the repayment plan last?

Bankruptcy Code says that if a person’s monthly income is less than the state’s median income, the plan will generally last for three years, unless the court approves a longer plan for cause. In cases where the debtor’s income exceeds the state’s median, the repayment plan will last for five years. However, in no case will the repayment plan last for longer than five years.

What are some advantages of a Chapter 13?

Chapter 13 bankruptcies offer several big advantages over Chapter 7 bankruptcies that are important to discuss. Most significantly, under a Chapter 13 bankruptcy an individual has the chance to save his or her home from foreclosure. By filing under Chapter 13, people can stop foreclosure proceedings and have a chance to restructure mortgage payments and thus save their home.

Chapter 13 bankruptcies are also beneficial because they allow debtors to restructure certain secured debts and extend out payments over the life of the Chapter 13 repayment plan. Doing this can lower payments and make the debts more manageable.

Chapter 13 bankruptcies are also useful because they allow for a co-debtor stay, something that prevents co-signers from being harassed by creditors while the other debtor’s case remains in bankruptcy. This is something not available under Chapter 7 and offers co-signers an important advantage.

Finally, Chapter 13 bankruptcies can be beneficial because they function much like a consolidation loan. Individuals make payments to creditors through the bankruptcy court and thus are able to avoid all direct contact with creditors while under Chapter 13 bankruptcy protection.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC today at (704) 370-2828. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice for your particular situation.